India Considers Tax Breaks to Boost Economic Slowdown

The Indian government on March 19, 2020, conveyed that they are considering easier loan repayment and tax breaks for small and medium-sized companies during the ongoing global pandemic— Coronavirus.

According to a recent report, the Ministry of Finance is considering relaxing bad-debt issues for small firms and extending loan tenors. Businesses are facing decreased cash flow due to the slowdown in the economic activity of the country. This is having an adverse impact on employees, loan repayments, interest rates and Taxes, the report further stated. The government announced this consideration after the countries including Canada, U.S., Poland, UK, China, Indonesia, etc, have declared disbursing funds to elevate the dipping Economy in their respective countries.

One of the major things the central government is considering is to remove Goods and Service Tax (GST) for companies dealing with hospitality and tourism. Some other major considerations are to provide relief on loan repayment for commercial vehicle aggregators, relaxation of bad-loan norms and extension or rescheduling of loan tenors.

The report said that the money, fiscal and financial markets have to work together to help the economy elevate from the current crisis and there will be a requirement of help from the Reserve Bank of India (RBI) to deal with the crisis. The RBI might have to intervene, directly or indirectly to ensure smooth flowing of funds into the Market.

Taxpayers have been looking for relaxation on regulations amidst the global panic and state authorities of Maharashtra and Goa have already started with the process. Relaxation has been provided for filing previous years’ value-added tax assessments. The date for filing GST Returns is likely to be extended the report said.

The report also mentioned that Maharashtra’s state tax authority has directed its officials to correspond with taxpayers wherever possible for the completion of assessments that are time-restricted.

So, this is good news for the economy.

Benefits of Tax Breaks

Tax breaks can help boost an economy facing Recession. It helps add more money for circulation. Here are the top three benefits of Tax Break:

1. Boosts economic growth

Citizens will now have more money to cash out to support their businesses or other important commitments. Consumer spending is co-related with Aggregate Demand (AD) and this will help drive that demand. The more the Income, the more the demand. A tax break for low-income earners will be a boost since it will balance out the demand in the higher and lower-income group.

2. Government borrowing

When there’s a tax revenue cut in a recession, the government will borrow and this will increase the Aggregate Demand (AD). People will finance this, which will ultimately help the government put unused resources into the cycle. This makes a huge difference in how people spend.

3. GST cut increases public spending power

Goods and services will become cheaper if the government takes off the taxes on them, which will increase the demand for that particular goods and service. This increases productivity.

Major World Economies’ Aid for Citizens

The US is considering direct payments of $1000 per adult and $500 per child in America while the UK announced a rescue package of $424 billion worth of government-supported loans, grants and tax cuts for companies that are struggling in the UK.

Meanwhile, Canada is set to roll out a fiscal package worth 3%of GDP and Australia is to announce a second plan worth public health of $10.2 billion. Poland has introduced help package worth $52 Billion while the Czech government has pledged an aid amount of $40 Billion.

Conclusion

The government considering a tax break could help boost the economy. However, it has to be done with proper planning and utter caution since the pandemic has caused a Global Recession.